by Ramin Mazaheri for the Saker Blog
Isn’t it interesting that nobody at all has used the phrase “QE 5” – the fifth round of Quantitative Easing – to describe the 2020 bailouts? I found just a single, brief use of it, from three months ago.
That’s because – look around yourself – we are in the thick of it right now. Once it finally stops and we can add it all up, then surely this is what the sum total of 2020 QE will be dubbed, no?
No.
If we cannot manage to learn from neoliberal economic history then we are surely incapable of learning any history at all – neoliberalism has only been around for 40 years. We don’t need to read Gibbons’ The History of the Decline and Fall of the Roman Empire and all its secondary tangents – most of us just have to adequately recall our own lives!
We know that the Western Mainstream Media and their mainstream politicians will not make that type of an effort: in order to sell newspapers, capture ratings, win votes and distance themselves from their very own wrong decisions the architects and mouthpieces for the post-Great Lockdown era are currently trying to repackage the world as being something entirely new, and to make us disregard and doubt the real experiences of our own lives.
The 2020 bailouts are indeed “somebody’s fault” – there was a moral hazard which created the endemic precariousness which the coronavirus pin popped. Therefore, we cannot let this round of QE wipe clean the moral and political failures of the Western chattering classes.
What we slaves need to do is to admit our powerlessness – to realise that we are in slavery, whether still under a stay-at-home order or not – and be cynical about our helplessness: this is not some “new” fifth round of Quantitative Easing – this is merely a restart to the same cycle which began with the first round of QE in 2008.
Remember when QE was new? Sure, but do you remember when we became cynical about QE?
The history of QE is very simple to relate if one analyses it with a socialist lens, i.e. a lens which demands that the burden of proof that “capitalism is good and efficient” be put on the defenders of Western capitalism.
The history of QE matured into pure vinegar by 2012, with the third round – history will show that this is when “QE Infinity” really started:
In 2012 it had become clear to all that the previous, unprecedented two rounds had not, in fact, finally trickled-down to the “real economy” despite more than three years of waiting. (“Trickle down” is a Western euphemism for “economic redistribution”, but modern history has only ever seen that occur in socialist-inspired economies.) It was now indisputable that the Western economy had indeed been severely damaged in the 2008 financial crisis, and that the QE collusion of Western central bankers had only succeeded in money-papering over those problems and padded the pockets of corporate banks and the 1%.
However, the US still decided to force its central bank allies to print as much as they could with QE 3 even though it was fixing nobody’s economy.
The goal of QE 3 thus became clear, and it’s why this round generated a lot of international anger from developing countries: the West would print as much money as they could to ensnare developing countries in debt traps and unsustainable loans via the free capital flows required in neoliberal globalisation. Or, as capitalist-imperialists call it: “just good business sense”.
This concept – those who can print the dollar, euro and yen at will are manipulating this very “exorbitant privilege” in order to buy up the assets of poorer nations – is never, ever discussed in the Western Mainstream Media. For them, foreign capital is only a boon to non-Western nations.
But wait, QE 3 also made it just as bad, if not actually worse, for the “non-imperialised” West.
It is no coincidence that 2012 was the year of the European Sovereign Debt crisis – QE 3 made everyone lose faith in the West, in Western leadership, in Western economic ideology, and the proof of this is that the biggest symbol of neoliberal ideological victory in the Cold War – the Eurozone – nearly collapsed.
However, the beauty of this deeply flawed version of the pan-European project is that it has opened the eyes of Westerners to the fact that Western capitalism-imperialism 100% trains its sights on its own people as well: the Western, colluding, high finance-dominated 1% undoubtedly tried to economically gut and dominate places like Greece – the alleged birthplace of “European” civilisation (despite ancient Greece being half in Turkey, LOL) – as deeply as they did any Developing World nation during this current neo-colonial era. This is why the European Union has come to be called a “neoliberal empire”, and neo-imperialism is an always-unsaid pillar of neoliberalism.
In 2020 the corona crisis will show Westerners once more about the rapaciousness of the neoliberal system they allowed to take over out of fear of the USSR and its “socialism NOT for the 1%”: high finance will gobble up the certain upcoming wave of Great Lockdown-related bankruptcies, further increasing the power of Corporate Circle while hollowing out Main Street.
Corona has provided a global economic reset, but Western neoliberals will only repeat the same play in their playbook: QE
2012 proved that assertion emphatically: when it comes to fiscal/monetary ideology the only solution they have is QE & Zero Interest Rate Policies.
If giving the rich as much soft money as possible doesn’t work for the West this time… then it will be more years of stagnant near-chaos for the 99% amid a protracted “class war of attrition” waged by the 1%. I described how the West’s medium-term future perfectly meets the definition of the economic condition known as “stagflation”, the Western endemic malaise of the 1970s, last week in Scarce jobs + revenue desperation = sure Western stagflation post-corona.
Corona, however, has provided a chance to wipe the mistakes from 2008-19 relatively clean. The biggest bailout in history is “nobody’s fault” – just hand over $2 trillion to high finance (and that’s only in the US, AND that sum only marked the start of QE 5).
Imagine if that sum was divided among the 130 million households of the US – think $15,000+ wouldn’t have increased demand for goods and services, thus increasing employment, thus creating broad wealth instead of the economic disaster building daily in May 2020? I bring this statistic up to remind that if the West would come to their senses then they could save themselves. Change IS possible. Especially for the rich.
But I predict the West will not deviate from its course, because without renouncing imperialism a capitalist economy & culture can never truly change for the better – such peoples are taught to admire the 1% and to scramble to join them, not to end them and their scramble-forcing.
Therefore, to avoid falsely believing that there is “progress” in the West, I propose a new concept: We should call the historic 2012 third round of QE not QE 3, but “QE 1.3”. Western central bankers will not permit new plays in their fiscal playbook and thus will issue even more rounds of QE – therefore the Great Lockdown has NOT wiped the slate clean in any real ideological sense, but has merely created a space for an “updating” of the same old operating system – the 2020 QE should thus be referred to as “QE 2.1”.
As the same playbook will be obstinately followed, and as the Western economy has the exact same flaws (but worse) as they did in 2008, we should expect more QE rounds in 2021, 2023, 2025, etc., which should be called “QE 2.2, 2.3, 2.4” respectively, not “QE 6, QE 7, QE 8”.
The reason we have not seen “QE 5” yet is because many who follow modern economics are still grappling with its accompanying reality of “QE Infinity” – some understood this back in 2012. However, infinity does not denote something which cannot be counted, but its exact opposite – something which can be counted forever.
Must we persist in playing such a game? Surely only the perpetrators of QE Infinity would benefit.
Calling this latest round “QE 2.1” is thus an act of resistance. Of course, the Mainstream Media would never use such a cynicism-inducing term. They will start using “QE 5” no later than the start of “QE 6” in a year or two from now.
Older readers may need to note that “QE 2.1” is exactly the language the younger class is habituated to, thanks to the seemingly bi-monthly messages that (for example) “iPod update 9.1 has been uploaded” to your computer, and without your ever even asking for it. It can allow for even more precision with, for example, “iPod update 9.1.14 has been uploaded”. So the less tech-interested readers should understand that this type of wording is not groundbreaking but quite common and current.
QE 2.1 is going to the same places as QE 1.1. did – it’s an imperialist crisis
QE 2.1 is not going to be used on for more debt traps for the developing world, like QE 1.3 was in 2012. Just as in 2008 money is flowing back to the financial centre (New York City) and corporate national hubs in order to protect them from the current financial chaos.
(I first described how corona is leading to a repeat of 2008, instead of to some Western neoliberal revolution, last month with No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all. I detailed a socialist analysis of QE 3’s effect on the Developing world in How QE has radically changed the nature of the West’s financial system as part of a 10-part series last winter on the Western “bankocratic” system.)
It’s not that history repeats itself perfectly and that we can assume that we can exactly overlay the financial history from 2008-19 to the upcoming era of 2020-31. No, it’s that we should realise that – whatever the exact future historical timeline – the neoliberal system can afford no other path: shutting off the spigot (ending “no strings attached” QE and raising interest rates back up to the 20% of 1980, or just a more typical 3-5%) would cause massive bankruptcies in high finance, and they are the vanguard party in the West’s bankocracy.
Unlike the USSR, there is not chance the elite of the US vanguard party is going to wilfully implode themselves. They are radicals who believe There Is No Altnernative (to Western capitalism-imperialism).
That’s why, just like QE 1.1, QE 2.1 is being used domestically to protect the imperial centre during the outbreak of crisis. Some is even finally being downloaned to non-banks and non-corporate entities, and to subsidise wages in some Western countries, but only a very inadequate portion – it is, like in 2008, being primarily used to “socialise the losses” of the 1%.
The new, recent, easily-graspable history of QE is that it has altered the flow of capital everywhere. While developing countries are hurt the most, corona is going to ram home to the Western domestic audience just how unpatriotic and immoral Western capitalism-imperialism really is.
How many rounds will of QE 2.0 will it take for Westerners to realise that?
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Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis.
Capitalist-imperialist West stays home over corona – they grew a conscience? – March 22, 2020
Corona meds in every pot & a People’s QE: the Trumpian populism they hoped for? – March 23, 2020
A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020
MSNBC: Chicago price gouging up 9,000% & the sports-journalization of US media – March 25, 2020
Tough times need vanguard parties – are ‘social media users’ the West’s? – March 26, 2020
If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020
Landlord class: Waive or donate rent-profits now or fear the Cultural Revolution – March 31, 2020
Corona repeating 9/11 & Y2K hysterias? Both saw huge economic overreactions – April 1, 2020
(A Soviet?) Superman: Red Son – the new socialist film to watch on lockdown – April 2, 2020
Corona rewrites capitalist bust-chronology & proves: It’s the nation-state, stupid – April 3, 2020
Condensing the data leaves no doubt: Fear corona-economy more than the virus – April 5, 2020
‘We’re Going Wrong’: The West’s middling, middle-class corona response – April 10, 2020
Why does the UK have an ‘army’ of volunteers but the US has a shortage? – April 12, 2020
No buybacks allowed or dared? Then wave goodbye to Western stock market gains – April 13, 2020
Pity post-corona Millennials… if they don’t openly push socialism – April 14, 2020
No, the dollar will only strengthen post-corona, as usual: it’s a crisis, after all – April 16, 2020
Same 2008 QE playbook, but the Eurozone will kick off Western chaos not the US – April 18, 2020
We’re giving up our civil liberties. Fine, but to which type of state? – April 20, 2020
Coronavirus – Macron’s savior. A ‘united Europe’ – France’s murderer – April 22, 2020
The same 12-year itch: Will banks loan down QE money this time? – April 26,
2020
The end of globalisation won’t be televised, despite the hopes of the Western 99% (2/2) – April 27, 2020
What would it take for proponents to say: ‘The Great Lockdown was wrong’? – April 28, 2020
ZeroHedge, a response to Mr. Littlejohn & the future of dollar dominance – April 30, 2020
Given Western history, is it the ‘Great Segregation’ and not the ‘Great Lockdown’? – May 2, 2020
The Western 1% colluded to start WWI – is the Great Lockdown also a conspiracy? – May 4, 2020
May 17: The date the Great Lockdown must end or Everything Bubble 2 pops – May 6, 2020
Reading Piketty: Does corona delay the Greens’ fake-leftist, sure-to-fail victory? – May 8, 2020
Picturing the media campaign needed to get the US back to work – May 11, 2020
Scarce jobs + revenue desperation = sure Western stagflation post-corona – May 13, 2020
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the NEW ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.
It follows perfect under software versioning practices to us QE 2.1. You have a minor revision in the code, but the core functionality remains exactly the same.
LOL! Bingo! But give it a few years and it’ll need a re-branding. Probably something as simple as “normal operations.” As it is, “QE” pretty much flies right over the heads of the plebes now. Heck, properly incorporated it into an algorithm, they could eliminate the Fed Chair position altogether, put it all on autopilot, and save us the tortured explanations.
It’s amazing that “QE pretty much flies right over the heads” of the average person, still.
“QE 2.1” it certainly should be. I hope others pick up on this.
“Unlike the USSR, there is not chance the elite of the US vanguard party is going to wilfully implode themselves. They are radicals who believe There Is No Altnernative (to Western capitalism-imperialism).”
No, the elite’s will not willfully implode themselves, but they have already unwittingly set the wheels in motion, and there is nothing that they can do to stop it.
The virus and the oil price shock have cracked the financial system. This, along with the massive government deficit spending ($5+ trillion deficit in the U.S. this year alone) has caused a dollar shortage, driving up the price of the dollar. QE is necessary to keep the dollar from exploding higher and collapsing the whole house of cards.
However, once the acute phase of the crisis passes and demand for the dollar drops, all of those already printed dollars, with no place to go, will cause the value of the dollar to fall, dramatically. The dollar will lose its reserve currency status, after all it’s value is too unstable, and its use too problematic, to be a reserve currency. China and Russia are already actively working on a replacement.
The dramatic fall in the value of the dollar, which is already baked in, will have the following consequences:
1. The elite’s financial assets, the source of their power, will become worthless. Only tangible assets will have value.
2. The U.S. will become materially poorer. It’s Geo-political power, which is now based solely on its financial power, will be gone. It will no longer be able to afford its bloated military, nor its military adventurism.
3. The U.S. will no longer be able to run trade deficits, funded by worthless paper. They will be forced to produce what they consume. This will force the U.S. to isolate itself and re-industrialize (under Trump, the process of isolation has already started), in the process providing good paying jobs to the masses, and as a result transferring power from the elite’s back to the people.
So I disagree with the author, massive QE, and the inflating away the value of the dollar that is sure to follow, is the best way to remove the elites from power.
The elites may not willingly destroy themselves, but they are helpless in the face of the disastrous consequences that have resulted from 40 years of government in their hands.
@dh-mtl
I find your analysis and projections interesting to read, but do not necessarily totally agree with your conclusions.
The fall in stock market prices due to the corona virus shutdown of the consumer driven economy has effectively wiped out a significant proportion of savings in the private sector stock market. Where did the money go ? It only existed on paper to start with as a merry go round of low interest rates and stock buy backs, that is essentially a Ponzi scheme and has little to do with the real economy. The issuance of more $billions, or is it $trillions, of federal reserve notes as US Treasury debt is an attempt to prop up or re-inflate the stock market. How this will work out remains to be seen.
The shortage of money aka US federal reserve notes is exacerbated by the loss of paying jobs and income by consumers and by corporations, who need baling out to survive. The Trump “gifts” go some way to counteracting the loss of money, but I doubt that it will be enough, since it is just a one shot deal that will not be sufficient to get back to the status quo ante.
The US dollar is holding its own with regard to the other major currencies, but the price of gold – a good inflationary indicator – has risen from around $1,500 to $1,700 per troy ounce.
As long as the privately owned Federal Reserve and its member banks can create money ex nihilo there will always be enough money to fund the US military, but this money creation as debt is denuding the consumer economy of funds in the rest of the private sector, and as Congress claims, the US Treasury will not be able to afford things like Medicare for All, which of course is complete fiction.
At the top of the power pyramid are the banks, and they actually benefit from the inevitable creation of more and more debt. But there has to be a limit, since the ability of borrowers to repay the loans has been severely eroded and defaults will occur. That is where the bankers’ bank the Federal Reserve comes in handy by buying up their member banks non performing loans i.e. bad debts with even more money they create ex nihilo. However, the bad debt money has already been spent into the economy that could cause inflation. It is really a question of balancing the equation – will it be enough to compensate for the money that was wiped out by the drop in the stock market ?
Only time will tell. The best laid plans of mice and men aft gang agley.
Kapricorn(4), very well said. money is fake. $4T was printed out of thin air. As much as I agree with you, I worry about the poor taxpayer, who owes $$M thinks he/she owns the house he/she “owns”, which may be worth $M on the paper and one day it goes puff. Matrix has learned it’s lessons during the Great Depression, but the people who lived it are mostly dead, the ones alive are mostly suffering memory loss. The new generations have their noses stuck in their pocket toys and live in never-never land.
This is to the others, one can not compare Matrix to the USSR, bacause USSR and its satellites lived in fake world, where the $US had two values 1.official 2.black market. The second one was more of a real one because this is what people had to pay to buy $US. Also, the money went through devaluation as well. Devaluation happened everywhere, except the $US, which is kept up by the Matrix. Welcome to the world of Virtual Reality.
Saker, I appreciate how the comments section on this site isn’t the circular troll firing squad free for all like the Unz Review. Comments here are invariably thoughtful and well-written. I will make another donation soon to support The Saker.
Thanks Ramin, I agree with almost every word.
Many people in the west are in denial, they will not face the truth because it is to disturbing.
I am not so sure anymore about the Marxist concept of capitalism as a system ruled by economic “laws” like laws of nature. Wealth and power concentration has reached such a level that capitalism does not matter. Class does. QE means that the financial class give money to itself. No need for production capital to profit when redistribution capital does the trick. It is class war and the predatory class is winning big time. Hence the lockdowns. If small capitalists are going to hell, who cares? They do not matter as they don’t belong to the selected few. It is more neo feudalism as capitalism (which still has lead to this state of affairs). Market? They don’t need any market. They can sacrifice the whole economy, as they reckon to end up as the big winners. Getting rid of some working class/slaves (us) is OK because the fourth industrial revolution is meant to replace us with AI (robots), which leave/leaves a much smaller carbon footprint than humans do. Welcome to the brave new exclusive world, in case you aren’t excluded from it…
Repo, QE, Bailout, Bail-in, it’s the ammo Wall Street and City of London arm themselves with every time their tit gets caught in a ringer. Fortunately for mankind, they have come to the end of their rope. But we must make certain only they are hanging from it. It means shutting down the global casino and restoring Glass-Steagall in its original while protecting people’s pensions and savings. It also requires a public credit system and the Third National Bank of the United States. It means massive investment in economic infrastructure involving water, power, transportation systems, education, science, and technology. And last, we need a crash program in commercial fusion, plus full funding of President Trump’s Artemis manned space flight to the Moon and Mars, and beyond. If we do this we’ll be just fine. If we don’t get the Congress and White House to act on these emergency measures, then something like that which destroyed Weimar, Germany, will soon be upon the US. and the world at large.
Ramin,
I follow your writings and I value your knowledge and insight very much.
You recently wrote about the dollar’s continued dominance in the world finance and I must say you really affected my interpretation of the situation. However I would like to know your opinion regarding the piece below written by Alastair Macleod via GoldMoney.com.
The Crisis Goes Up A Gear: Is This The Beginning Of The End For The Dollar?
Authored by Alasdair Macleod via GoldMoney.com,
Dollar-denominated financial markets appeared to suffer a dramatic change on or about the 23 March. This article examines the possibility that it marks the beginning of the end for the Fed’s dollar.
At this stage of an evolving economic and financial crisis, such thoughts are necessarily speculative. But an imminent banking crisis is now a near certainty, with most global systemically important banks in a weaker position than at the time of the Lehman crisis. US markets appear oblivious to this risk, though the ratings of G-SIBs in other jurisdictions do reflect specific banking risks rather than a systemic one at this stage.
A banking collapse will be a game-changer for financial markets, and we should then worry that the Fed has bound the dollar’s future to their fortunes.
The dollar could fail completely by the end of this year. Against that possibility a reset might be implemented, perhaps by reintroducing the greenback, which is not the same as the Fed’s dollar. Any reset is likely to fail unless the US Government desists from inflationary financing, which requires a radically changed mindset, even harder to imagine in a presidential election year…….
MOD: People aren’t able to copy and paste long full articles onto the blog.If people want to read the article they need to go to the site and read it.Only a short section is posted.